Teacher pay revamp long overdue

Posted on December 2, 2013 by Gene Tunny

I’m very pleased the Queensland Government is considering linking teacher pay to teacher performance (see today’s Courier-Mail), as improving pay for the best teachers will help stop the leakage of the best teachers out of the education system and may motivate many teachers to perform better. Of course, it will be important to get the design of the performance pay scheme right, so teachers are rewarded for genuine improvements in student outcomes, and don’t unfairly benefit from simply having a favourable socio-economic mix of students.

I’ve previously discussed performance pay for teachers in a few posts:

Teacher performance pay

Teacher bonus scheme a worthwhile experiment

School autonomy plan a good start

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Mining capital spending saved Qld economy from really poor growth in 2012-13

Posted on December 1, 2013 by Gene Tunny

The 2012-13 State Accounts, released by the ABS on Thursday, confirm that heavy engineering construction, largely by the resources sector, shored up the Queensland economy in 2012-13 and protected it from the adverse impacts of Government spending cuts. This is apparent from a decomposition of the sources of Queensland’s 3.6% Gross State Product (GSP) growth in 2012-13:

Contribution

I expect the State Government will start adding to GSP growth over 2014, particularly if the anticipated early election in March or April goes ahead. The State and Local Government sector has certainly cut its spending significantly in recent times, partly as a result of lower capital spending by public corporations such as Seqwater and Energex (see chart below). While State Government spending cuts have been necessary for improving the State’s finances, it’s reasonably clear they have impacted on growth in the short-term.

Govtexp

I have no idea why the statistical adjustment the ABS makes to the GSP numbers has had such a large impact on the GSP growth rate. It may be that Queensland is exporting more to other States, but we’ll need to wait until Queensland Treasury produces its own detailed State Accounts estimates sometime in the future to have a better idea what happened in 2012-13.

There are positive signs for improvement in the Queensland economy over 2014, as I’ve discussed in a recent post (Reasons to be optimistic). New ABS data on concrete production released on Friday and reported by Pete Faulkner (Concrete production points to QLD construction recovery) supports an optimistic outlook.

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Perth might grow larger than Brisbane, but it won’t beat SEQ 200km City

Posted on November 27, 2013 by Gene Tunny

In its media release on its new population projections yesterday, the ABS noted:

“Highlights from the ABS projections include Perth overtaking Brisbane in 2028, at three million people, and then ten years later, the Australian Capital Territory overtaking Tasmania.”

This was picked up by the Brisbane Times, but I believe this claim, which is based on the ABS’s defined Greater Capital City Statistical Areas (GCCSA), is misleading, because the ABS’s GCCSA for Brisbane excludes the Gold and Sunshine Coasts. This ignores the reality of the South East Queensland (SEQ) 200km City, which I’ve discussed before:

Brisbane’s identity – centre of the 200km City

Tradies know what it means to live in the 200km City

In the second post I’ve linked to above, I’ve charted the official Queensland Government population projections, which show SEQ is expected to grow to nearly 4.4 million people by 2031. This is larger than the ABS’s projected population for the whole of WA in 2031 of around 4 million people.

Hence I think the ABS’s claim about Perth over-taking Brisbane is a little misleading, as it ignores the reality of the 200km City.

Finally, I’d note that it’s possible the population within the boundaries of the Brisbane GCCSA could increase substantially if there were a more relaxed attitude in Brisbane City Council towards inner city development, as discussed by Brad Rogers in a recent guest post:

Guest post – Old Queenslanders in a New City

Posted in Brisbane, Gold Coast, Population | Tagged , , , , , , , , | 3 Comments

Is Santa good for the economy?

Posted on November 22, 2013 by Gene Tunny

The Centre for Independent Studies (CIS) is holding a function in Sydney on Tuesday December 10 on The Capitalist Claus – Why Commercialism is Good for Christmas, featuring Miranda Devine and CIS researchers. I’ve always had mixed feelings about the economic impact of Christmas. It’s certainly good for the economy in the sense that the consumer spending benefits retailers, manufacturers and the hospitality sector. However, many of the goods that are given are manufactured overseas, benefiting overseas manufacturers rather than our own. Also, as someone just old enough to remember when Marxism still had some popularity outside of radical student organisations, every Christmas I worry there might have been something to the idea of “capitalist over-production”, when I see the huge amount of unappreciated and often useless gifts that people give to each other.

Certainly basic microeconomics suggests Christmas gift giving is much less efficient than giving equivalent cash transfers at the same value as the gifts that would be purchased. That’s because the person receiving the cash could likely use it to buy something that gives them a higher level of satisfaction than the gift given. This was argued forcefully in one of my all time favourite economics articles, Joel Waldfogel’s The Deadweight Loss of Christmas.

So Christmas might be good for the economy in the sense of boosting demand for goods and services, but it’s not necessarily good from an economic perspective – the economy could produce more of the goods and services we really want if we give up trying to guess what other people might want and give them cash instead.

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Treasury wants to acknowledge unreliability of budget estimates

Posted on November 18, 2013 by Gene Tunny

There’s a great new working paper out today from the Commonwealth Treasury, Estimates of Uncertainty Around Budget Forecasts, which suggests a change to budget reporting that would make it hard for current and future Australian Governments to claim they will restore the budget to surplus. That is, unless they’re forecasting a surplus of several tens of billions of dollars. Check out the confidence intervals around the budget balance (e.g. the range over which we’re 90% confident the budget balance will lie in) in the chart below, bearing in mind 1% of GDP is around $15 billion. The basic story is don’t give any credibility to a budget forecast beyond next financial year, and don’t trust next year’s forecast too much either.

ucb

Well done to leading Treasury boffin John Clark and his colleagues for a great paper.

I’ve previously discussed the difficulties of budget forecasting on my favourite radio show, Mornings with Steve Austin on 612 ABC Brisbane:

Brisbane ABC radio interview from this morning – why is budget forecasting so difficult?

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Guest post – Old Queenslanders in a New City

Posted on November 15, 2013 by Gene Tunny

This is a guest post from my friend and colleague Brad Rogers, who is also Secretary of the Queensland Branch of the Economic Society of Australia. Views expressed are Brad’s own, and are not necessarily shared by me, our employer or the Economic Society.

Old Queenslanders in a New City

Recently, Brisbane’s Lord Mayor Graham Quirk said:

“A leading destination for business and investment, major events and international education, Brisbane is rapidly emerging as a diverse and energised global city with a $135 billion economy.”

Everyone in Brisbane has seen the Old Queenslanders in and around the city. However, you may not know these old buildings are protected by Council regulations. In October of 1995, Council introduced ‘Gray Tape’, a blanket layer of protection over suburbs where the majority of homes had been built before the end of World War II.

It is difficult to see how Brisbane can be a ‘global city’ when most of the population are forced to live in 100 year old wooden boxes. The argument is the old houses are historical and have ‘character’. Well horse and buggies are historical and have character but we are not forced to drive them to work every day. We have museums for these things.

When the rules were made to stop people knocking down the Old Queenslanders, Brisbane was still a small city. Now Brisbane is growing up and needs room for people to live in the city to be close to work. Maintaining the restrictions on development of land close to the CBD of Brisbane is pushing the price of each dwelling up to levels seen in New York and London. Land is limited by nature, but the number of dwellings on the land is limited by Council.

As an example the West End average house price for a renovated Old Queenslander is about $1 million. There are about 1,500 Old Queenslanders in West End at this time.  If half of these houses were able to be developed into high-rise residential apartments, at one apartment building per 6 houses, that would provide 125 new apartment buildings. There would be around 50 apartments in each building allowing an extra 6,250 families or about 15,500 people to live close to the city. The other half could be turned into townhouses and new parks. This could be repeated all around our city, brining a cosmopolitan lifestyle to our little city.

New apartment buildings cost about $30 million to build. Allowing developers to build 125 new buildings would provide a large boost to the economy of about $3.7 billion. Then all the families moving in to the new homes would buy furniture and spend in shops, providing much needed economic activity for the city. This sort of development could happen in Paddington, Red Hill, Spring Hill, New Farm, Highgate Hill, Kangaroo Point and East Brisbane. That is $30 billion added to the Queensland economy with no Government funding required.

Fewer people to move from outer suburbs will reduce the pressure on public transport, roads and the environment. More people living in the city would give the Government more money to spend on big events, arts and other entertainment.

Restrictions on building residential high-rise buildings in Brisbane have caused increased costs and long travel times to work, and they have reduced our standard of living and the growth of the economy. The Council restrictions mean fewer people can live close to work and, therefore, we need to pay for more roads, trains, buses and tunnels. The increased travel times to and from work take parents away from their families, increase pollution and reduce our productivity. If we cannot go up, we must go out, and that causes urban sprawl that impacts heavily on the environment.

If Brisbane really wants to become a World City, then we must stop listening to the vocal privileged few who are living in little wooden houses in the middle of the CBD and start developing new stylish homes for our workers. Removing the Grey Tape would allow development of Brisbane where six Old Queenslanders could make way for a block of units which could house hundreds of families.

If we want to keep some of the Old Queenslanders, let’s put them in a historic village out of the operational city of Brisbane. The people who like the old things can go to the historic village and ride horses around on the weekends. We can show our children the funny little houses we lived in before Brisbane was a real city.

Brad Rogers, 15 November 2013

Posted in Brisbane, Housing, Transport | Tagged , , , , , , | 5 Comments

Gold Coast outlook continues to improve

Posted on November 15, 2013 by Gene Tunny

After a period of weakness following the financial crisis, during which many Gold Coast tradies had to drive up the M1 every day to jobs in Brisbane and Ipswich (see my 2011 post Tradies know what it means to live in the 200km City), the Gold Coast appears to be recovering quite nicely. The Gold Coast Bulletin reported yesterday nearly $900 million of new construction was approved following temporary cuts to developer charges (Gold Coast construction industry back on track with council fee concessions sparking $885m in projects). This adds to other good news for the Gold Coast, particularly on tourism, that I referred to in an earlier post:

Gold Coast should be good location for Rolls-Royce dealership

So the outlook over the next few years for the Gold Coast appears good, particularly considering the preparations that will be necessary for the 2018 Commonwealth Games.

Gold Coasters will certainly welcome employment growth, as the local jobs market has been sluggish recently (see chart below I’ve borrowed from Queensland Treasury’s regional labour force brief).

GC

Other good news is that yesterday’s regional labour force data from the ABS appear to confirm Far North Queensland’s labour market is recovering nicely, although Far North commentators correctly urge a cautious reading of the volatile data:

FNQ Unemployment rate falls on some volatile data; even the Trend paints a more +ve picture

Headline hyperbole warning

Posted in Gold Coast, Labour market | Tagged , , , , , , , | 1 Comment

Reasons to be optimistic Qld will cope with shock from mining investment decline

Posted on November 11, 2013 by Gene Tunny

BIS Shrapnel’s new report on the mining industry appears to pick up the points made at the Energy Skills Queensland conference I attended last week regarding how gas will boom, but the outlook for minerals is much less optimistic (More CSG-LNG jobs than previously forecast, but minerals job vacancies have plummeted). In the Brisbane Times coverage of the BIS Shrapnel report (Mining forecast predicts big winners and big losers), BIS Shrapnel’s Arian Hart is reported as saying:

“Queensland wins in a way, through the strong expansion of [liquefied natural gas] production over the next five years. On the other hand, Queensland is also facing the brunt of the biggest declines of investment.

“The Queensland economy is going to face a shock over the next five years as it deals with that.”

I’m reasonably confident Queensland will cope well with the shock, particularly given there is growing evidence of a recovery in the broader Queensland economy, based on encouraging data on employment, retail trade and building approvals released in the last couple of weeks (see for example the Queensland Treasury’s labour force information brief from last week).

Earlier related posts include:

Qld’s economic future bright if we look beyond short-term

Qld Treasurer rightly rejects pessimism about mining industry

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More CSG-LNG jobs than previously forecast, but minerals job vacancies have plummeted

Posted on November 5, 2013 by Gene Tunny

Yesterday I attended the Energy Skills Queensland (ESQ) Annual Conference at the Royal International Convention Centre at the RNA Showgrounds in Brisbane. At the Conference, ESQ released its Queensland CSG to LNG Industry Workforce Plan, which received coverage from ABC News (Queensland’s gas industry tipped to double new jobs):

Energy Skills Queensland (ESQ) has released its 2013 workforce plan and it shows demand for skilled workers in the coal seam and liquefied natural gas industries is set to explode.

ESQ chief executive officer Glenn Porter says the workforce is expected to peak near 14,900 workers by 2024, more than double original assessments.

The workforce plan will become available soon on the ESQ website.

The good news on gas was offset by bad news from minerals, with Dr Gavin Lind from the Minerals Council of Australia noting in his presentation that minerals job vacancies, based on the search terms “engineering”, “metallurgy” and “geoscience”, had plummeted from around 3,500 in early 2013 to fewer than 530 in the last week of October. According to Dr Lind, employment of geologists and geo-scientists is a leading indicator of the state of the sector.

The best presentation of the day was from Kevin Berg, General Manager of the Gladstone Curtis Island LNG project for Bechtel, which is building all the LNG processing facilities on the island. Kevin noted that Curtis Island is Bechtel’s biggest project anywhere in the world and is using the equivalent of 13 Eiffel Towers in steel. After Kevin’s presentation, Master of Ceremonies Madonna King noted she was impressed by the “sheer scale” of the project.

Finally, I should note Education and Training Minister John-Paul Langbroek gave a good introductory address to the conference, in which he noted the Government is aiming to bring TAFE into the 21st Century. With fully contestable funding coming in July 2014, TAFE will certainly be forced to do that, otherwise it will lose a lot of market share and have to severely cut back on its operations.

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Congestion charges part of solution to costly congestion

Posted on November 4, 2013 by Gene Tunny

Infrastructure Partnerships Australia appears to make some good points in its lobbying of the Abbott Government on the need for congestion charges to help alleviate traffic congestion and defer or avoid the need to augment transport infrastructure, as reported in the Courier-Mail this morning. With a congestion charge you might have to pay $5 to enter the Brisbane CBD during peak times, for example.

I’ve previously noted the high cost of traffic congestion and expressed support for considering congestion charges, other transport demand management options (e.g. staggering start times for public servants), and lessening restrictions on inner city development so we can have higher population densities, which will encourage more people to cycle and walk. My previous posts include:

Govt should explore transport demand management options before committing to costly infrastructure

Benefits of higher urban population density – more cycling and walking to work

Traffic congestion is deadly

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